Prime Minister Sir Keir Starmer has sparked controversy by suggesting that landlords and shareholders do not fall under his definition of “working people” as Labour prepares for one of the biggest tax increases in recent history.
With Chancellor Rachel Reeves set to unveil her maiden Budget next week, the government is expected to target capital gains, inheritance tax, and employer contributions to retirement funds to raise an estimated £35 billion.
Speaking from the Commonwealth summit in Samoa, Starmer clarified that he considers “working people” to be those who “go out and earn their living, usually paid in a monthly cheque,” contrasting them with those who earn primarily from assets. Downing Street attempted to soften his remarks, explaining that Starmer was referring specifically to people whose primary income source is assets, not small-scale investors with modest savings.
Budget to impose record-high tax burden
Rachel Reeves’ upcoming Budget is expected to bring in the largest tax hike since 1993, pushing the UK’s tax burden to its highest level since records began in 1948. Reeves is reportedly focused on capital gains tax hikes and employer National Insurance contributions for retirement funds—measures that could impact landlords, shareholders, and employers with substantial contributions to employee pensions. These tax hikes are part of Labour’s strategy to address what they describe as a £22 billion fiscal deficit, “for real and not performative,” Starmer said.
Despite concerns that Labour’s approach could drive entrepreneurs out of the UK, Starmer pointed to last week’s successful investment summit as evidence that investors remain optimistic. He said that global investors are confident about Britain’s economic potential, in part due to the government’s proactive approach to fiscal management and structural reforms.
Defining ‘working people’ and potential tax targets
Starmer’s distinction between “working people” and those who primarily earn from assets has raised questions about who will be targeted in Labour’s tax strategy. Treasury minister James Murray reiterated that Labour’s pledge to shield “working people” applies to those who derive most of their income from employment rather than investments.
The definition has fuelled speculation that capital gains tax on profits from shares and property sales will be raised. There is also concern about the potential imposition of National Insurance on employer pension contributions, which some have criticised as a “straightforward breach” of Labour’s manifesto commitments.
Tackling the fiscal deficit head-on
Starmer has insisted that the Budget will address the UK’s fiscal challenges directly, stating he is “not prepared” to delay tough decisions. He described the Budget as setting the direction for rebuilding the country’s economic foundations, a departure from previous governments’ tendency to defer difficult choices.
“We’ve got to get both bits of that right,” Starmer said, “not just recognising the problems but rolling up our sleeves and dealing with them.” His comments underscore Labour’s intent to tackle the £22 billion deficit, laying the groundwork for what Starmer describes as a “Budget about rebuilding the country.”
The response from investors and business groups has been mixed, with some stakeholders welcoming the emphasis on stability and fiscal discipline, while others express concern over potential capital flight and the broader impact on business confidence.
What the Prime Minister said:
In an interview with Sky News in Samoa, Keir Starmer was pushed on his manifesto pledge to protect ‘working people’ from tax rises and how he defined them.
‘For working people we made an absolute commitment that their income tax wouldn’t go up, their NI wouldn’t go up, their VAT wouldn’t go up.
‘I said that in the campaign, we’re going to keep to those promises. We are going to have to make difficult decisions in this budget, I’m not going to preempt the budget you know that.
‘But what we are going to do, it’s really important that we fix the foundations, that we clear up this mess once and for all and on that we build a better Britain.
‘That will be measured in people feeling better off, in the NHS not just back on its feet but fit for the future and public services working in the way that people can expect to see from their public services.
‘I would define a working person who goes out and earns their living, usually in a monthly cheque, but that’s obviously very broad so let me be clear.
‘What I mean, who I have in my mind’s eye when I’m making the decisions as Prime Minister are the sorts of working people who go out, work hard and maybe save a bit of money but don’t have the wherewithal to write a cheque to get out of difficulties if they or their family get into difficulties.
‘People who have got that anxiety if you like in the bottom of their stomach that says, we’re doing it all right, but if something were to happen to me or my family I don’t have the wherewithal to get out of it.
‘When I tell you who’s in my mind’s eye, I think everyone watching will know whether they are in that category because you carry in that situation a sort of knot in the bottom of the stomach which if push comes to shove and something happens to me and my family I can’t just get a cheque book out, even if I have savings.
‘They are the sort of people I came into politics for to try and make sure tehy had secure jobs, and didn’t have the anxiety of public services not working, to make them feel like they have better opportuniteis… that’s who I had in my mind’s eye.’
‘Pressed on whether that covered people who work but also get money from assets such as property and shares, Sir Keir said: ‘They wouldn’t meet my definition, but you can probably give me any number of examples, you’re adding a second questions to the first which is you’re asking me for a definition of a working person and then making assumptions about what kind of taxes could go up.
‘You could go through that exercise or you could ensure working people hear from me… people watching this will know whether they are in that group or not, people who work hard, who are anxious to make ends meet, and who know that if something happens to them or their family, they can’t just write a cheque book.
‘I am really concerned about them, politics for me is who do you have in your mind’s eye when you make those decisions, I’m not ideological.
‘I made clear promises in the election campaign and I intend to keep those promises, so let me be very clear about that.’
Paul Jones
Harvard alumni and former New York Times journalist. Editor of Business Matters for over 15 years, the UKs largest business magazine. I am also head of Capital Business Media’s automotive division working for clients such as Red Bull Racing, Honda, Aston Martin and Infiniti.
